What is a Franchise? How to Get a Dealership?

Do you want to start your own business but don’t want to take the risks of starting from scratch? The franchise system makes you part of a ready-made success story by allowing you to use the name, business model, and experience of a strong brand. With the right franchise, customer trust, operational support, and rapid growth can be achieved with you. So what exactly is a franchise, how does it work, and is it really right for you? Let’s explore together!

What is a franchise?

A franchise is when a brand’s trademark, business model, and business know-how are granted to an independent entrepreneur under specific rules and conditions. The entrepreneur who takes the franchise pays an entry fee at the beginning of the process and makes regular payments, called royalties, which are calculated as a percentage of the turnover, as long as they continue operating the business. This system is not only about using the brand name but also about ensuring the brand’s standards in aspects such as store decoration, service quality, marketing methods, and staff training. Thanks to this, customers encounter the same service quality no matter which branch they visit.

How does the franchise system work?

The franchise system operates through a detailed contract signed between the brand owner and the entrepreneur. This contract clearly defines the rights and obligations of the parties, the entry fee, territorial rights, operating standards, and duration. While setting up the business, the entrepreneur receives training and operational support from the brand and also contributes to advertising expenses. The brand owner, on the other hand, monitors the business to ensure that it always operates in compliance with standards. This structure provides the entrepreneur with brand recognition and a ready-made business model, while also allowing the brand to grow quickly.

The difference between a franchise and a dealership

There are some fundamental differences between a franchise and a dealership, which are often confused. A franchise is a system with stricter rules, established standards, and more intense brand control. The store’s appearance, product presentation, and service quality must be the same at every branch. In a dealership, however, the entrepreneur is more independent; it is more focused on product sales, and the entrepreneur has greater freedom in store management, decoration, or marketing. In a franchise, there are entry fees and regular royalty payments, whereas in a dealership, the model usually proceeds only through product purchases, with no obligation for continuous payments. Therefore, while a franchise provides a more corporate and controlled structure, a dealership offers more flexibility but provides limited support.

Advantages of getting a franchise

There are many advantages that a franchise offers to entrepreneurs. These advantages can be listed as follows:

Brand recognition

Operating under a well-known and standardized brand makes it easier to gain customer trust. Thanks to brand awareness, advertising and marketing efforts are more effective from the start.

Lower risk

Taking a franchise means working with a proven business model rather than creating a new one from scratch, which reduces the likelihood of failure.

Operational and training support

Since the franchisor provides support in various areas, including business setup, staff training, management standards, stock, and supply chain management, it is especially advantageous for entrepreneurs with limited experience.

Opportunity for rapid growth and expansion

Brands operating with a franchise system grow more quickly as entrepreneurs join the system and open new branches. This system also creates cost advantages by benefiting from economies of scale.

Saving time and money

Since business planning, marketing strategies, and product/service standardization have already been tried and tested, mistakes and trial-and-error processes are reduced. This allows savings in both time and costs.

Savings in bulk purchasing

Franchised businesses can reduce costs by taking advantage of the franchisor’s collective purchasing power when selecting suppliers.

Disadvantages of getting a franchise

In addition to its many advantages, the franchise system also has some disadvantages. These can be listed as follows:

High initial cost and ongoing fees

Franchise fees, decoration, equipment, and rent can create high fixed costs at the beginning. Additionally, there may be ongoing financial obligations, such as royalties based on turnover or advertising contributions.

Limitations on control and freedom

In this system, you must comply with the rules, standards, and guidelines set by the franchisor. This means limited freedom to make changes in areas such as menus, decoration, pricing, or suppliers.

Contract terms and duration

Franchise agreements are usually long-term and binding, which can put the franchisee at a disadvantage if the contract is drafted in favor of the franchisor, making it difficult to terminate or amend.

Royalties and other financial burdens

Royalties (a share of turnover) and advertising contributions can negatively affect profitability. Additionally, the suppliers' product prices, as determined by the franchisor, may be higher than market rates.

Reputation risk

The poor performance or low service quality of another franchise branch can affect the entire brand’s image, thereby negatively impacting other franchisees.

Local market and location risk

If the chosen location is unsuitable or the customer potential in the area is low, the business may be negatively affected. Even with brand recognition, a branch opened in the wrong place can incur losses.

Lack of creativity and adaptation flexibility

Since the franchisee must comply with brand standards, they have limited ability to adapt the business to the local market or to introduce innovations.

How to open a franchise?

Opening a franchise involves similar processes to establishing a brand but also requires additional steps. Generally, the process of opening a franchise can be explained step by step as follows:

Choosing the right brand and sector

The first thing to do after deciding to open a franchise is to choose the sector. It is possible to own a franchise in various sectors, including food, retail, education, and services. After selecting the sector, you should research the franchise brands in that sector and evaluate criteria such as brand reputation, customer base, market share, and growth potential.

Market research and location

After choosing the brand, the region where you will operate and the location where you plan to open your store should be selected. Factors such as target audience, competitors, income levels in the area, and rental costs directly affect business success. Therefore, it is essential to evaluate these factors when choosing a location.
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Financial planning

The next step is to calculate the total investment cost required for the franchise. When calculating expenses such as entry fees, decorations, equipment, rent, working capital, personnel expenses, stock costs, and permits/licenses, the entrepreneur needs to conduct a financial assessment, considering that income may not be generated in the early days of the business.

Communication with the franchisor and application

Once all decisions are made and financial planning is complete, the next step is to contact the brand formally. After learning about the details of the franchise contract, the entry fee, royalties (share of turnover), and services offered, the application form is filled out. At this stage, business plans and financial documents may also be requested.

Reviewing the contract and legal processes

It is essential to be careful during the contract stage. Ensure that issues such as duration, territorial rights, brand usage conditions, standards (decoration, product quality, service delivery, etc.), inspections, and termination conditions are clearly stated. Obtaining legal consultancy at this stage will be highly advantageous.

Receiving training and support

The franchisor typically provides training and operational support before the branch opens and continues to offer support throughout the business. This support is crucial in areas such as staff training, menu planning, stock management, customer service, and quality control.

Store/workplace setup

Once the location is selected, the store’s decoration, interior design, signage, and compliance with brand standards must be ensured. Equipment orders, supplier agreements, and license/permit processes should be completed.

Marketing and launch preparation

At this stage, a promotional plan should be prepared for the opening; local advertising, social media announcements, promotions, or launch campaigns may be organized. Support from the brand for advertising materials, visuals, and promotional products will also be beneficial.

Starting operations and business management

After the opening, the business can operate with daily activities. Attention should be paid to customer service, stock control, staff training, quality control, and financial tracking. Also, taking into account inspections and feedback from the franchisor will increase business success.

Continuous monitoring and development

Market conditions or customer expectations may change. Regularly analyzing business performance, identifying problems early, and making improvements in coordination with the franchisor are critical for sustainability. It is also essential to stay up to date in areas such as innovative practices, efficiency-enhancing methods, or digital marketing.

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